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Updated: 7 hours 25 min ago

Clinton Versus Trump: Who’s Stronger on Innovation?

9 hours 17 min ago

With the Republican National Convention behind us and the Democratic convention in full swing, it seems like a good moment to ask how a Donald Trump presidency or a Hillary Clinton presidency might affect the prospects for high-tech entrepreneurship and business growth in the United States.

At this stage, both candidates have given major economic addresses, and both parties have published their platforms. So it’s becoming easier to see how a President Trump or President Clinton might approach questions of keen interest to entrepreneurs and investors, like the merits of the carried-interest loophole in the federal tax code, or how to handle visas for high-skilled workers.

In the spirit of informed debate, I’ve assembled a point-by-point comparison below.

But first, since this is an opinion column, let me be blunt about my own beliefs. I don’t think the candidates’ stances on innovation should be foremost in your mind on November 8. Something much more fundamental is at stake—namely, the survival of our democracy and, perhaps, our species. I agree with Tony Schwartz, the remorseful ghostwriter of The Art of the Deal, that “if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.” That means there are 7.3 billion reasons to vote against an unstable and narcissistic demagogue like Trump, especially in these tumultuous times.

I support Clinton. Okay? Now that I’ve put my own cards on the table, let’s proceed.

Interestingly, when you dig into the published record, you won’t find much difference between the Democratic and Republican parties on the broad importance of innovation. It’s a bedrock assumption in American economic policy that innovation and entrepreneurship drive job growth and lead to greater productivity, efficiency, consumer choice, and wealth.

This idea has the virtue of being true—though macroeconomist Robert Gordon has argued with some merit that innovation is gradually losing its mojo—and it’s embraced by both of the candidates, in their speeches, and both of the parties, in their platforms. The word “innovation” appears 22 times in the Republican platform and 14 times in the draft Democratic platform.

The real question is, what are the conditions that best support innovation? On that matter, there’s far more room for debate. Maybe innovation goes faster when wealthy investors are allowed to keep more of their income and capital gains and reinvest the money. Or maybe it’s healthier in the long run when the government imposes more progressive taxation and puts the funds into education, social programs, and R&D.

Your feelings about a question like that depend on your political philosophy. It’s when you start to pick apart the specific innovation-related policy proposals in speeches by Trump and Clinton and in the two parties’ platforms that you begin to see how they diverge along ideological lines.

Here’s the rundown. For specifics, I’m drawing mostly from the final draft of the 2016 Republican Platform, the July 21 draft of the 2016 Democratic Platform, Hillary Clinton’s June 22 economics speech in Raleigh, NC, and Donald Trump’s June 28 trade policy speech in Monessen, PA.

Immigration

Startups and technology giants alike depend on legions of highly educated foreigners working in the U.S. under H-1B guest visas. These workers are now pawns in a larger debate about immigration and jobs.

Republicans: A fear that immigration imperils American jobs is at the core of the GOP platform and Trump’s rally speeches. This attitude appears to extend to lawful guest workers, including those with H-1B visas. Trump himself has flip-flopped on the issue: he has said that talented foreigners who attend U.S. universities should be allowed to stay, but also that the H-1B program has been abused “for the explicit purpose of substituting for American workers at lower pay.” The Republican platform takes a clearer stance: “In light of the alarming levels of unemployment and underemployment in this country, it is indefensible to continue offering lawful permanent residence to more than one million foreign nationals every year,” it says.

Democrats: Clinton said back in 2007 that the U.S. should increase the number of H-1B visas, which has long been capped at 65,000 per year. But she hasn’t talked about the issue much during the 2016 campaign. In a June interview with Vox, Clinton appeared to sympathize with some of the GOP’s fears, citing “heartbreaking” stories of “people training their replacements from some foreign country” as a cost-cutting measure. But later she called for “a credible path forward for reform that is truly comprehensive, addressing all aspects of the system, including immigrants living here today, those who wish to come in the days ahead, from highly skilled workers to family members.”

The Democratic platform says that the U.S. immigration system is “broken,” pointing to problems such as discriminatory quotas, green-card paperwork backlogs, and the need for a clear path to citizenship for immigrants already in the country. The platform doesn’t mention the H-1B program explicitly, but says the country must “attract and retain talented people from all over the world.”

Education and Workforce Development

The two parties agree on the need for an educated workforce to drive job growth in high-paying sectors like technology, but they diverge on the proper role of the federal government.

Republicans: Education isn’t one of Trump’s signature issues. Mainly, he has come out in favor of charter schools and vouchers and against forgiveness of student loans. He has also called the Common Core standards initiative “a total disaster” and has threatened to shrink the federal Department of Education.

On education, as in many other areas, the GOP platform offers a deeper look into the likely policies of a Republican administration under Trump’s leadership. The document says the federal government “should not be a partner” in education reform, “as the Constitution gives it no role in education.” But it goes on to list a few “policies and methods that have actually made a difference in student advancement,” including school choice and “STEM subjects and phonics.” The platform adds that “because technology has become an essential tool of learning, it must be a key element in our efforts to provide every child equal access and opportunity.”

On higher education, the GOP platform says the federal government should get out of the student loan business, and it blasts campuses for turning into “zones of intellectual tolerance…as if college students need protection from the free exchange of ideas.” The platform also calls for “new systems of learning to compete with traditional four-year schools: Technical institutions, online universities, life-long learning, and work-based learning in the private sector. Public policy should advance their affordability, innovation, and transparency and should recognize that a four-year degree from a brick-and-mortar institution is not the only path toward a prosperous and fulfilling career.” (Didn’t we used to call that community college?)

Democrats: In a section entitled “Pursuing our Innovation Agenda,” the Democratic platform says better education and workforce training are needed to harness the technologies transforming the economy so that they create higher-paying jobs. To that end, Democrats say they will invest in “high-quality STEAM classes” (STEM plus Arts) and computer science training, among other priorities. The platform opposes for-profit charter schools, calls for a crackdown on for-profit colleges that misuse federal financial aid, and promotes job training as a priority for veterans and people in underserved communities and those afflicted by poverty and environmental problems.

Clinton has said that every student should have “options after high school, whether it’s a four-year degree, free community college, an apprenticeship or other forms of higher education.” She also supports tax credits for companies that … Next Page »

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Profitability Helps San Diego Lender Step Out from Industry Cloud

14 hours 47 min ago

With a cloud lingering over the peer-to-peer lending industry, privately held National Funding is disclosing new details today about its operations, in a bid to step into the light and differentiate itself as a fintech company and alternative lender.

In contrast to some alternative lenders, the San Diego firm said it is growing fast and is consistently profitable.

Problems at one industry leader, San Francisco-based LendingClub (NYSE: LC), have added to waning enthusiasm among some investors for the peer-to-peer model, which matches online users who want a loan with Wall Street investors or wealthy individuals looking for a higher rate of return than many traditional, fixed-income investments.

LendingClub helped to pioneer the model, saying in November 2012 that it had surpassed $1 billion in loans issued since 2006, when it was founded. The company became a Wall Street darling when it raised $1 billion-plus through its 2014 IPO, and now claims to have deployed roughly $19 billion in loans since inception.

LendingClub stumbled earlier this year, however, when an internal investigation found improprieties in the sale of $22 million in loans. The probe raised specific concerns about internal controls at LendingClub (Founding CEO Renaud Laplanche resigned on May 9), as well as broader concerns about the business model and transparency of LendingClub, Prosper Marketplace, and other peer-to-peer lenders.

Against that backdrop, National Funding said today that through the first half of 2016, it has provided over $1.5 billion in loans since 2012, when its business “morphed” into an alternative lender, according to founder and CEO Dave Gilbert. National Funding was founded 17 years ago, but operated for most of that time as an equipment leasing company, Gilbert said in a recent interview.

Alternative lending encompasses a broad range of loan options outside traditional bank loans. While National Funding is not a peer-to-peer lender, Gilbert said its loans are unsecured, and the company is not subject to the banking regulations that apply to other traditional lenders.

Since 2012, Gilbert said National Funding has grown annual revenue (generated from charging interest) by about 225 percent—from $18.1 million in 2012 to more than $59 million in 2015. The alternative lender is on track to generate about $75 million in revenue this year, Gilbert said.

Gilbert instead describes National Funding as “a balance sheet lender,” explaining that it retains loans on its books instead of selling its loans to another financial institution or individual investor at a discount. Some borrowers would prefer to deal with the original lender if a problem arises during the course of the loan, he said.

“There is more integrity to the process,” Gilbert said, because National Funding uses traditional loan analysts as well as software to analyze and process its loan applications. About 40 percent of the firm’s loan applications are completed online—and those loans can be processed in days. Nevertheless, Gilbert said most customers still want to talk to a loan officer and have a consultative discussion.

Another oft-mentioned concern about peer-to-peer lenders is that most members of the new class of lending companies have yet to prove their business model in the ultimate stress test—an economic downturn. Gilbert said he’s not worried, however, because National Funding already has weathered the Great Recession.

“We know what’s it’s like to be in an economic downturn,” he said. “Fortunately, our default rate has always been low, so even during the recession our customers made on-time payments. We are and always have been stringent in our lending underwriting practices and make sure that [small and medium-sized business] owners are taking out the right loan that they can actually repay.”

Gilbert maintained that National Funding also stresses transparency.

“We, along with other leading lenders in this space, are diligent at disclosing costs and terms, and take extra measures to ensure customers understand what they are getting into,” Gilbert said. “That’s why we consider our loan consultants to be such a big advantage over lenders that just lend electronically.”

National Funding also stands out because it never relied on outside investors, Gilbert said. Friends and family provided the initial funding, with additional growth financed from the business itself. “It’s been slower growth instead of hyper growth,” Gilbert said.

Through the first half of this year, National Funding said it has provided $151.8 million in loans to small and medium businesses, up about 45 percent from the first half of 2015.

The lender said it has provided capital to about 25,000 businesses nationwide. Working capital loans make up approximately 80 percent of National’s business, although its borrowers also use its loans to finance business expansion, marketing, inventory, equipment, and taxes.

The typical National Funding customer generates less than $1 million in sales, and has between 25 and 50 employees. The top-five industries it serves are special trades, general contractors, medical, business services, and trucking.

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The Outbreaks Are Here, Where’s Our Response Plan?

Mon, 07/25/2016 - 17:32

The news of the first Zika case in Pierce County—the 14th in Washington State—reminds us that the spread of disease is inevitable. While we don’t have in our region the kind of mosquito that transmits Zika, the latest infected patient returned from a visit to Puerto Rico. Thanks to modern travel, whether by mosquitoes or infected humans, only a unique environmental factor could contain a disease where it started. If we know that a virus exists in a certain area, we should take it as a given that it could appear anywhere.

Given the certainty that disease will spread, there are a number of things we must do to be ready:

Having a response system in place is of utmost importance—for the safety of people everywhere. Here in the United States, we can no longer assume these infectious diseases are not a problem for Americans. Not only did Ebola and Zika virus make their way rapidly onto U.S. soil, but ancient diseases like leprosy are creeping up in numbers here as well. When the headlines fade, it’s easy to forget why we need a system at the ready; each of us has a responsibility to keep this topic top of mind for our public health policy makers.

  • We must continue research. When people question the importance of funding little-known diseases or ones that are not perceived as a threat to the developed world, they need look no further than Zika, Dengue Fever, and Ebola to understand why this type of research is incredibly vital to the well being of humankind. We must first understand the basic biology of these infectious agents and how they spread, in order to be prepared.
  • We must continue funding. As funding cycles ebb and flow, from sources like the National Institutes of Health and private foundations, we must be mindful that funding for disease research and product development is mandatory for us to be ready to protect ourselves.
  • We must develop vaccines in a different way. Current methods of vaccine development—which take large amounts of time and money—don’t work when a speedy response is of the utmost importance; scientists are hobbled by the time table of the human immune system. We need to find new ways to develop vaccines quickly and cost-effectively.

All these elements provide the basis for rapid response, but how do we execute the plan when the outbreak is upon us?

This requires another paradigm shift. Instead of producing vaccines in rich countries and struggling to ship enough to protect the entire world, we need to help develop vaccines in the countries where they are needed most.

One way is to share important technology. As part of a project funded by the Biomedical Advanced Research and Development Authority (BARDA), part of the U.S. Department of Health and Human Services, IDRI is partnering with developing country vaccine manufacturers to vastly improve their ability to respond quickly during an influenza outbreak. BARDA and the World Health Organization identified institutes in developing countries that are able to make influenza vaccines, and IDRI provides the technologies for adjuvants, which are added to a vaccine to increase the body’s immune response. This new approach to making vaccine technology available to developing countries means a rapid response to an outbreak where it’s needed most.

Another way is to build new companies in countries where disease is endemic. This serves the dual purpose of developing vaccine technologies on site and providing the catalyst for new industries that can offer training and employment. With an investment from the South African government, IDRI has formed a company called Afrigen Biologics, which is dedicated to the local development and production of vaccines of critical importance to Africa, including tuberculosis and HIV. This also provides a platform for rapid scale-up of vaccine development in case of outbreak. This is a model that can be replicated in other parts of the world, if companies are willing to share their expertise.

We must be proactive rather than reactive when it comes to global health. We cannot wait for Zika to abate and then make a plan for the next infectious disease. By then, it will be too late.

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The Real Cracks in the Foundation of Ransomware

Fri, 07/22/2016 - 09:30

The rise of ransomware has been striking over the past two years, rapidly dominating headlines with its frequency, its wide range of victims, and its profitability. So when news hit that two of the largest and most notorious delivery systems for ransomware — the Necurs botnet and the Angler exploit kit — had gone dark, that was obviously good news. Unfortunately, in the world of cybersecurity, respites like these never seem to last very long. And, sure enough, after nearly a month of silence, Necurs came back online with a vengeance.

The sudden disappearance and sudden resurgence of Necurs is a perfect reminder of how fighting cyber crime can be like trying to rid a garden of weeds. We can rip up weeds one by one, but it’s only a matter of time before they come back or get replaced by a new variety.

Rather than take a break and enjoy our good fortune any time a malware delivery network goes down, a better exercise is to see how much we can accomplish while criminals shuffle to find new distribution.

Cutting ransomware off at the knees

To understand why botnets and exploit kits matter, it’s important to understand how cyber attacks — and particularly ransomware attacks — work. In order to be successful, a ransomware attack requires more than just the specific piece of malware that runs on a victim’s system, encrypting their files or locking them out. That particular functionality (the scrambly/locky bits) may be the most visible element of a ransomware attack, but getting that malware onto the machine in the first place takes work. So does accepting ransom payments and supporting decryption transactions.

Deploying and monetizing ransomware takes infrastructure. And infrastructure doesn’t pop up overnight.

Case in point: In early June, Necurs, one of the world’s largest botnets (a network of infected computers often used to deliver spam and phishing e-mails), suddenly went offline. It was a devastating loss to criminals who relied on the botnet as the primary distribution channel for their malware, and the ramifications were noticeable almost immediately. In particular, security researchers reported significant drop-offs in infections from both Locky (ransomware) and Dridex (a banking trojan) — two notorious strains of malware that, up to that point, had been on the rise.

Just four months ago, Locky was infecting nearly 60,000 machines a day. Without Necurs to deliver it, it largely became inactive.

As if that wasn’t enough good news, shortly thereafter, reports surfaced that the infamous Angler exploit kit had gone belly-up, too. Exploit kits provide attackers with their second primary way of delivering ransomware and other malware payloads — taking advantage of software vulnerabilities to infect victims who visit malicious websites. What makes Angler’s demise so surprising is that since its emergence in late 2013 it had grown in notoriety to become the most popular exploit kit available, accounting for over 80 percent of drive-by attack traffic as late as this April.

Unfortunately, even with the downfall of these two major delivery vehicles, however, the resulting drop in ransomware infections was short-lived.

It’s hard to keep a profitable idea down

As this chart from researchers at F-Secure Labs indicates, following Angler’s rapid decline, criminals wasted little time hopping over to a competing exploit kit called Neutrino.

The criminals behind Neutrino quickly responded to the influx of demand by raising their prices 2x. The entire situation bears a strong similarity to the rise of Angler in the first place. Angler had itself replaced another exploit kit called Blackhole when Blackhole’s alleged author was arrested in October 2013. It was only a month later, in November, when Angler arrived to fill the vacuum.

This is a pattern we see regularly in cybersecurity. Malware families rise and fall, and new variants rise to take their place. CryptoWall was built on the bones of CryptoLocker, CryptXXX on those of Reveton. Both were delivered in volume by Angler. Now that Angler is gone, they and other new ransomware variants are simply finding distribution through Neutrino or other channels.

Ransomware is as ransomware does

Disruptions like these are merely periods of retooling for the ransomware community. Sometimes actors get arrested, hosts are blocked, or tools are engineered around, but eventually, they rise again. So long as the methods behind these attacks work, and so long as the returns are relatively safe, unattributable, and consistent, the individual tools criminals use to perpetrate them will be repainted, redeployed, and revived.

That means that blocking or disrupting these tools individually, one by one, isn’t a sustainable or effective approach. Unfortunately, it is a neat assessment of the signature-based strategy that has driven most endpoint security approaches to date. Security administrators are stuck in a perpetual game of whack-a-mole, content with modest, temporary gains that evaporate as soon as criminals make the smallest of adjustments and new attacks spring up onto the scene.

To gain real traction against ransomware we need to identify and block the underlying malicious behaviors that are found across multiple ransomware campaigns. All campaigns have three common needs: 1) Attackers need to get access to the system; 2) they need to create a process with proper rights to open and encrypt data; 3) they need to present their demands to the victims.

As researchers analyze the thousands and thousands of ransomware samples that show up every day, we see how these building blocks are created in the execution of each and every one. The malware signatures are designed to change, and the delivery channels evolve to overcome discovery and disruption. These fundamental behaviors do not. They’re what make ransomware what it is. By stopping them, we stop ransomware. It’s that simple.

That’s why, as organizations invest to repel ransomware, they need to find protection that will block its unchanging and malicious activities. Whether the attacks are ransomware, botnets, or exploit kits, our best strategy is to simply stop the actions we know will harm us.

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Biotech Roundup: Scangos’s Exit, Zafgen’s Shakeup, Jounce, Relypsa & More

Fri, 07/22/2016 - 08:12

The top news in biotech this week centers around one big job opening: the head seat at Biogen, now that George Scangos has announced plans to leave the company. Who takes the gig, and the strategic direction he or she chooses for Biogen will have implications not just for the company and its employees, but the sector overall.  But there’s plenty more to dig through as well, from a shakeup at Zafgen to a few new high profile startups and a newly public gene therapy company. We’ve got all the details below.

—Cambridge, MA-based Biogen (NASDAQ: BIIB) announced that after a six-year stint, CEO George Scangos will step down in the coming months after a successor is identified. Scangos will leave Biogen in much better shape than when he started, but the CEO transition will come as Biogen is at a crossroads, with a high-risk drug pipeline that could swing the company’s fortunes significantly one way or the other.

—Boston-based Zafgen (NASDAQ: ZFGN) abandoned its lead drug, beloranib—an obesity treatment beset by safety problems—and will instead put its resources behind a follow-on preclinical obesity drug that it believes to be much safer. Xconomy spoke with CEO Tom Hughes about the decision, which is terrible news for patients with the rare disease Prader-Willi Syndrome; Zafgen had hoped to win FDA approval of beloranib in Prader-Willi, which would have made it the first marketed drug for the disease since human growth hormone over a decade ago. Shares of Zafgen fell more than 50 percent on the news.

—Swiss firm Galenica Group agreed to pay $32 a share, or $1.53 billion total, to acquire Relypsa (NASDAQ: RYLP) of Redwood City, CA, and its hyperkalemia drug patiromer (Valtessa). Galenica made the bid—which must be approved by Relypsa shareholders—about two months after the FDA rejected a rival hyperkalemia drug owned by AstraZeneca.

—Celgene (NASDAQ: CELG), of Summit, NJ, inked its latest immuno-oncology deal, forming a wide-ranging alliance with Cambridge-based Jounce Therapeutics to develop a group of cancer drugs. It’s the first partnership for Jounce, and a big one: the startup got a $225 million up front cash payment from Celgene and a $36 million equity investment.

—In other deal news, Zimmer Biomet paid $77 million for a majority stake in France-based Medtech as part of a bid to boost its presence in the fast-growing robotic surgery space.

—Three new startups emerged with financing rounds this week. Cambridge-based Fulcrum Therapeutics, led by former Epizyme CEO Robert Gould, got a $55 million Series A from Third Rock Ventures to develop gene control drugs for a variety of diseases, starting with Fragile X Syndrome and a rare form of muscular dystrophy. Also in Cambridge, Oncorus debuted with a $57 million round and a plan to develop next-gen oncolytic viruses, a type of cancer immunotherapy tool. And on the West coast, Palo Alto, CA-based Bioz started up with $3 million in seed cash from 5AM Ventures to help develop software meant to help speed up life sciences research.

—Bruce Bigelow profiled Dauntless Pharmaceuticals, a stealthy biotech company creator in San Diego forming single-drug startups.

—In other financing news: Synthorx, a San Diego synthetic biology startup, got a $10 million investment led by RA Capital Management…The venture arms of Merck and Amgen backed therapeutic video game developer Akili Interactive, bumping its Series B up to $42.4 million…Madison, WI, antibody developer Invenra got $3 million in funding…N-of-One, of Lexington, MA, which helps analyze and interpret genomic cancer tests, raised $7 million from Providence Ventures and Excel Venture Management.

—San Francisco gene therapy startup Audentes Pharmaceuticals (NASDAQ: BOLD) raised $75 million in an IPO, selling 5 million shares at $15 apiece, right in its projected range.

—Shares of Evoke Pharma (NASDAQ: EVOK), of San Diego, meanwhile, plummeted more than 70 percent after its nasal spray form of gastrointestinal drug metoclopramide failed a Phase 3 trial.

Purdue University is raising a new $10 million venture fund to help back the school’s spinout companies, part of an effort to raise its life sciences profile, as Alex Lash reports.

—The FDA rejected Novartis’ attempt to win approval of a biosimilar version of Amgen’s white blood cell booster pegfilgrastim (Neulasta). Meanwhile Amgen and Allergan posted positive results from a Phase 3 trial of their own biosimilar, a copycat version of the breast cancer drug trastuzumab (Herceptin). And in other Amgen news, the Thousand Oaks, CA, company filed for FDA approval of osteoporosis drug romosuzumab.

—An FDA advisory committee voted in favor of Valeant Pharmaceuticals’ (NASDAQ: VRX) psoriasis drug brodalumab, meaning the drug could win FDA approval by Nov. 16. Valeant splits rights to brodalumab with AstraZeneca after Amgen bailed on a collaboration with AstraZeneca on the drug earlier this year.

—Germany’s Merck KGaA announced plans to put $115 million into a new life sciences campus in Burlington, MA, and replace its current facility in Billerica. Construction should wrap up by the end of next year.

—Aegerion Pharmaceuticals (NASDAQ: AEGR) announced another round of job cuts and plans to withdraw its rare disease drug lomitapide (Juxtapid) from Europe. Aegerion will soon merge with Vancouver’s QLT (NASDAQ: QLTI) and change its name to Novelion Therapeutics.

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Zingle Raises $3M to Expand and Improve Messaging App Technology

Fri, 07/22/2016 - 01:03

Zingle, a Carlsbad, CA-based tech startup targeting the service industry and consumer-facing businesses with its messaging app technology, has raised $3 million in venture capital, according to a regulatory filing earlier this month.

The funding, provided by Santa Barbara, CA-based Rincon Venture Partners and Venice, CA-based CrossCut Ventures, represents the first institutional investment for Zingle. The company raised $1 million last year, according to a 2015 regulatory filing.

Ford Blakely, who was previously a business and financial consultant with LECG, founded Zingle in 2009 with a stand-alone device for restaurants, coffee shops, and other service businesses that enabled customers to use mobile text messaging for their take-out orders. The device would print each order for the business and respond to the customer by texting a confirmation and order number.

Since then, Zingle has evolved into a platform that aggregates message apps, including Facebook Messenger, Twitter direct messaging, SMS (text messaging), and in-app-chat (for branded apps), in a single user interface, enabling a hotel front desk, for example, to respond to guest requests.

The company said its Web-based technology can automatically respond with a programmed response, (For example, responding automatically to a hotel guest who asks: “What is the wifi password?”) or forward the query to an appropriate hotel staffer to respond.

In April, Zingle said Hyatt had selected Zingle as its preferred guest messaging service for Hyatt and its affiliated hotels around the world.

Mobile messaging apps like WhatsApp, Facebook Messenger, WeChat, and Viber have exploded in popularity in recent years. Many offer low-cost or free chat and social messaging, and enable users to communicate via group chats, and to exchange video clips, digital images, graphics, and emojis. In February (about a year after Facebook acquired WhatsApp for $19 billion), WhatsApp disclosed that it had surpassed 1 billion current monthly users.

Messaging apps from Zingle—along with applications from bigger Bay Area competitors like Twilio, Plivo, and Tropo—also have proven to be useful tools for e-commerce and business-to-customer interactions.

In an e-mail to Xconomy, Zingle’s Blakely said he plans to use the venture funding to “invest further in product to make sure we are providing the most current, forward-thinking customer messaging platform for all our customers.”

Happy #TBT from our fearless Founder & CEO @fordblakely! #Hate2Wait #H8toW8 pic.twitter.com/KcMuKvoqRZ

— Zingle (@ZingleMe) July 14, 2016

Blakely said he also intends to add sales and marketing resources to take advantage of increasing demand from businesses for Zingle’s messaging technology. The company currently has just under 30 employees.

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With Biogen at a Crossroads, CEO Scangos to Step Down

Thu, 07/21/2016 - 09:19

[Updated, 9:20 a.m. ET, see below] Biogen has seen its highest highs under CEO George Scangos, but some lows too. After a year in which Biogen’s share price has fallen by more than a third and one of its top drug prospects failed, Scangos, who has led the company since 2010, has announced plans to step down.

As part of its earnings release, Cambridge, MA-based Biogen (NASDAQ: BIIB) said this morning that Scangos will leave the company “in the coming months” after a successor is identified. Biogen is beginning a search immediately, and will consider candidates from both within and outside the company.

“The company has an exciting future and I am proud to have had a role in helping Biogen improve the lives of so many patients today and so many more in the future,” Scangos said in the statement. “This is the right time for a new leader to take the reins and lead Biogen through its next stage of development, and I look forward to returning to the West coast to take on one more set of activities and spend more time with my family.”

The news comes amidst a difficult year for Biogen, marked by executive changes, a lagging stock price, and general angst about the high-risk, high-reward strategy championed by Scangos during his tenure.

Scangos, the former head of Exelixis (NASDAQ: EXEL), was named Biogen’s CEO in 2010 during a rocky time. Biogen was in a long-running battle with Carl Icahn about its strategic direction and hadn’t produced any FDA approved drugs in six years. But Icahn sold off his stake, and Scangos made a number of changes, like closing the company’s San Diego research site—part of its old “Idec” name, from its merger with Idec Pharmaceuticals in 2003—cutting a bunch of jobs, reshaping the company’s management team, moving its headquarters from the Boston suburbs to Cambridge, and altering the company’s strategic course. He also benefited from a program already in place, an oral multiple sclerosis drug called dimethyl fumarate (Tecfidera) that went on to win FDA approval in 2013 and become a blockbuster drug. It’s currently Biogen’s top-selling product, generating close to $2 billion in sales during the first half of 2016.

“George joined Biogen at a very challenging time. He re-organized operations and he oversaw the enrichment of our product pipeline and the launch of several products,” said Biogen chairman Stelios Papadopoulos, in a statement. “In short, George did an outstanding job and I believe he is leaving the company well positioned for success.”

Under Scangos, Biogen has also by design amassed a risky pipeline, highlighted by a potential Alzheimer’s drug, aducanumab, and another drug, opicinumab, meant to repair nerve damage in patients with multiple sclerosis. In January 2015, Biogen shares were at over $400 apiece as the company was gaining steam on early positive signals for aducanumab. Shares have since eroded significantly, but Biogen has restructured and cut a number of jobs to support its risk-heavy investments, halting preclinical work in immunology and fibrosis. In May, Biogen even announced plans to spin off its hemophilia business—which includes two marketed drugs for the blood disease—into a new company. Biogen has in effect continued to double down on risky bets, the largest of which is the ongoing Phase 3 for aducanumab, which could swing the fortunes of the company wildly one way or the other. One of those big bets flopped in June, when opicinumab failed a Phase 2 trial in MS. Another important late-stage program, in partnership with Ionis Pharmaceuticals (NASDASQ: IONS), is a treatment for a rare debilitating muscle disease called spinal muscular atrophy. Data from a Phase 3 trial are expected next year.

Shares of Biogen currently trade around $262 apiece. And while that’s billions in value lost from Biogen’s highest highs, it’s also orders of magnitude higher than when Scangos arrived in June 2010, when shares were at less than $50 apiece. It’ll be interesting to see which direction Biogen heads from here strategically. Biogen has been very deliberate in its dealmaking, reluctant to make a big splash with a large acquisition. The angst regarding that strategy has only heightened as it’s increased its focus on risky programs. As Jefferies analyst Brian Abrahams wrote in a note this morning, the company is “at a strategic crossroads.”

[Updated with CEO comments] On a conference call with analysts on Thursday morning, Scangos said the company is focused “largely on neurology” for potential deals, and that the CEO transition wouldn’t impact its business development efforts. Scangos wouldn’t rule out deals outside of neurology, but said the “bar gets higher” for an acquisition or partnership when it’s further removed from the company’s core expertise.

“You can make more sophisticated decisions about areas you really understand in detail,” he said, adding that the company is in “a number of discussions” now and aims to bring some of those to a conclusion.

Shares of Biogen surged more than 6 percent in pre-market trading Thursday morning.

Here’s more on Scangos in 2011, shortly after he left Exelixis to take the Biogen job. Biogen is holding a conference call this morning to discuss its quarterly earnings.

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Dauntless Takes Flight with New Business Model for Starting Biotechs

Thu, 07/21/2016 - 02:43

First came Inception Sciences, a holding company for spinning out biotech startups established by Versant Ventures and Peppi Prasit, the veteran San Diego drug developer. Then came COI Pharmaceuticals, the shared “community of innovation” for startup biotechs established by San Diego’s Avalon Ventures as part of its partnership with GlaxoSmithKline.

And now there is Dauntless Pharmaceuticals, a third San Diego-based holding company created with an innovative business model for starting new biotech companies as efficiently as possible.

Even though Dauntless was founded almost exactly a year ago, CEO Joel Martin has been trying to maintain a low profile, saying, “We don’t want to tip our hand. We are definitely interested in oncology, but there is no value in disclosing details.”

As for the business model, Martin said, “It’s a little like Inception. It’s a little like what Avalon is doing. But it’s structured differently. We tried to learn from what everyone else has done.”

Unlike a conventional biotech, which may hold a number of drug candidates in various stages of development, Dauntless is focused on advancing each drug candidate as the sole asset of each separate company it forms. Dauntless says its simplified business structure is more capital-efficient, and there are important tax advantages for investors and other stakeholders. It should result in shorter timelines, lower costs, and higher returns.

“We really have a development focus,” Martin told me. “We don’t have our own laboratory. We outsource everything. We’re trying to minimize the total cost [of drug development] because our needs change with each stage of development.”

Dauntless came to light after the MoneyTree Report on second-quarter venture capital activity turned up a couple of funding deals for “Dauntless 1,” the first biotech created by the umbrella company.

Dauntless said last year it had raised $12 million to advance DP1038, a preclinical-stage drug intended to treat endocrine cancers. But so far, the company has actually drawn only $3 million last year and $4 million earlier this year. “There will probably be a third closing at some point” to be determined, Martin said. “We are taking capital as needed, not sooner.”

(The MoneyTree Report, which showed Dauntless raising $8 million in the first quarter of 2016 and $4 million in the second quarter, was inaccurate, Martin said.)

All of the company’s funding so far has come from Sofinnova Ventures, and Mike Powell, a Sofinnova general partner in San Francisco, is board chairman. David Kabakoff, a Sofinnova partner in San Diego, also is a Dauntless board member.

Martin said Powell, a longtime pilot and aviation buff, inspired the company’s name. After reviewing a list of famous airplanes, Martin said the co-founders picked the Navy’s Dauntless SBD, a carrier-based scout plane and dive-bomber during World War II.

Dauntless has only five employees, including two who worked with Martin previously at Cebix, the San Diego biotech that shut down in early 2015. “Our concept was to take advantage of a team that works very well together and has the trust of their financial backers,” he said.

When a conventional biotech gets acquired, the acquiring biopharmaceutical is often interested in only one drug, so it shuts down the biotech and indefinitely shelves other drugs that were under development.

In a statement last year, Dauntless disclosed that its first drug candidate was licensed from Aegis Therapeutics, a San Diego drug-delivery and drug-formulation company. In an interview last July with the industry e-mail newsletter BioWorld, Powell said that Sofinnova had provided enough funding to take DP1038 through proof-of-concept studies in endocrine cancer, using the 505(b)(2) pathway to FDA approval.

The Dauntless co-founders declined to provide further details at the time. But Martin told me the company might be ready to disclose more details by the fall.

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Audentes Prices $75M IPO As Gene Therapy Eyes First U.S. Approval

Wed, 07/20/2016 - 09:26

As the possibility of the first ever gene therapy approval in the U.S. draws closer, more gene therapy players are entering the public markets. Today, it’s San Francisco’s Audentes Therapeutics, which aims to use gene therapy to treat a group of rare diseases.

Audentes sold 5 million shares at $15 apiece in its IPO last night, right in line with its $14 to $16 per share expectations. The $75 million raise will help Audentes fund clinical work it’s doing on rare diseases such as X-Linked myotubular myopathy, Crigler-Najjar Syndrome, and Pompe disease. Audentes will begin trading on the Nasdaq today under the symbol “BOLD,” a nod to its name, which is derived from the Latin term for “one who has courage or boldness.”

Gene therapy’s multi-decade roller-coaster ride has been well documented, in Xconomy and elsewhere. The promise of shuttling a long-term, if not permanent genetic fix into a patient with a one-time treatment has tantalized scientists for years. But even with many recent ups and downs and questions regarding how broadly gene therapies will be used, how much they’ll cost, and how long they’ll last, the field is as close as its ever been to impacting healthcare. Spark Therapeutics (NASDAQ: ONCE) is in the process of filing for approval of a gene therapy for a genetic form of blindness. If approved by the FDA, it would become the first ever marketed gene therapy in the U.S. A group of hemophilia gene therapies are in clinical testing, and the returns—both in hemophilia B and the more common hemophilia A—while early, are encouraging. Bluebird Bio’s (NASDAQ: BLUE) work in blood diseases like beta-thalassemia and sickle cell disease has also shown promise.

As all of this has been unfolding, gene therapy startups have been forming and trickling into the marketplace over the past few years. Bluebird, Spark, UniQure (NASDAQ: QURE), Dimension Therapeutics (NASDAQ: DMTX), RegenXBio (NASDAQ: RGNX), Voyager Therapeutics (NASDAQ: VYGR), Applied Genetic Technologies Corp. (NASDAQ: AGTC), AveXis (NASDAQ: AVXS) and others have all gone public since 2013. Some, like Avalanche Biotechnologies and Celladon, have had significant clinical failures. But the newer gene therapy delivery tools, or viral “vectors”—most commonly, adeno-associated viruses, or AAVs—have so far proved to be much safer than those used in the past, a key distinction since significant safety problems are what wasted away gene therapy investments at the turn of the century.

Now here comes Audentes, which, like a few other gene therapy companies such as Dimension, AveXis, and Voyager, has a license to some of the AAV vectors owned by RegenX and could owe milestone payments to the company if these treatments progress. (RegenX’s work comes from the labs of University of Pennsylvania gene therapy pioneer Jim Wilson). Audentes is entering the public markets without any human clinical data as of yet. Its three lead products, for Pompe (AT982), Crigler-Najjar (AT342), and X-Linked myotubular myopathy (AT132), are expected to produce preliminary data from their first trials in the second half of next year. Audentes holds worldwide rights to all of them.

Each of these diseases is rare; X-Linked myotubular myopathy, for instance, affects about 1 in 50,000 newborn males worldwide, according to the National Institutes of Health. Pompe affects about 1 in 40,000 people, and Crigler-Najjar is diagnosed in 1 in 1 million newborns. There are treatments available for Pompe, so-called enzyme-replacement therapies that require frequent infusions, but Audentes’s pitch is the potential convenience of a single, long-lasting treatment with AT982. Nothing is available for X-Linked myotubular myopathy, a devastating muscle disease that often kills patients diagnosed with it by early childhood. People with one form of Crigler-Najjar, type 1, have to undergo hours of phototherapy every day to lower the dangerous levels of bilirubin in their bloodstream. But the effect of phototherapy wanes as patients get older, meaning a liver transplant might be required. Patients with type 2 Crigler-Najjar, by comparison, respond to the seizure drug phenobarbital.

Audentes has raised $135.8 million in equity financing since its 2012 inception, and had $80.3 million in cash as of the end of March. OrbiMed Advisors is by far Audentes’s largest shareholder with a 29.8 percent stake before the IPO. Others include 5AM Ventures (14.5 percent), Versant Ventures (11.1 percent), Sofinnova Venture Partners (7.8 percent), and Deerfield Management (6.3 percent). The company is led by president and CEO Matthew Patterson, who has had stints at a variety of rare disease companies such as Genzyme, BioMarin Pharmaceutical (NASDAQ: BMRN), and Amicus Therapeutics (NASDAQ: FOLD).

Here’s more on Audentes shortly after its Series A round in 2013.

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Synthorx Raises $10M to Expand Use of Synthetic DNA in Biologics

Wed, 07/20/2016 - 01:00

Synthorx, the San Diego synthetic biology startup that expanded the number of DNA base pairs with two synthetic nucleotides, said today it has raised $10 million in a Series B financing round led by RA Capital Management, the Boston life sciences hedge fund.

Existing investors Avalon Ventures and Correlation Ventures joined in the round. The San Diego firms have invested $6 million since 2014, when Synthorx was founded, CEO Court Turner said yesterday. An unnamed pharmaceutical company also is providing additional undisclosed funding under a drug development deal signed in February, Turner said.

The new funding represents a shift from proof-of-concept to demonstrating how a promising research breakthrough in synthetic biology can be used to produce new biologic drugs at commercial scale, Turner said. The company plans to use the proceeds to double its headcount (from eight to 16), and to finance the development of new protein-based drugs that incorporate at least one synthetic amino acid.

In its quest to develop new biologics, Synthorx has focused on potential products for treating pain, metabolic disease, and infectious diseases, Turner said.

The company’s technology is based on research led by Floyd Romesberg, a biological chemist at The Scripps Research Institute. In addition to the four standard nucleotides that comprise DNA (designated as A, C, T, and G), Romesberg’s team showed that a novel synthetic DNA base pair (X and Y) could be inserted into bacterial DNA that reproduced with no change in the altered DNA.

The initial goal at Synthorx, Turner said, was to use the techniques developed in Romesberg’s lab to insert synthetic DNA into E. coli bacteria and to make proteins that incorporate synthetic amino acids.

Recombinant protein therapeutics already have had a dramatic impact in medicine, and examples abound, such as insulin for diabetes and monoclonal antibodies in cancer immunotherapy. But many protein therapeutics have limitations that stall their advance. For example, certain proteins are only effective if they fold in a particular way.

The ability to incorporate synthetic amino acids into proteins also is not new, and many protein  therapeutics with synthetic amino acids have been developed, Turner said. “But a lot of them don’t advance because [production] can’t be scaled up commercially. They can’t be made efficiently and at low cost.”

The groundbreaking potential of Synthorx’s technology is the ability to insert synthetic DNA in bacteria and efficiently produce proteins with multiple synthetic amino acids at low cost and at sufficient scale for drug discovery and development. “We are the only company where you can add synthetic amino acids to any size protein or peptide and produce it at scale,” Turner said.

The funding round led by RA Capital also comes with needed expertise in identifying high-value products for development, Turner said. Andrew Levin, a managing director of RA Capital, is joining Synthorx’s board of directors as part of the financing.

Synthorx also has been meeting with pharmaceutical companies that have developed protein therapeutics that stalled, and could possibly be optimized using Synthorx’s technology.

As part of its hiring plans, Synthorx will add a chief science officer as well as a chief business officer in coming months, Turner said.

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Is the Future of Cybersecurity in M&A?

Tue, 07/19/2016 - 13:32

Last month Symantec announced its plans to buy Blue Coat for $4.7 billion. Has the consolidation—and creation of this enterprise security giant—put immense pressure on other industry players? In an ideal world, and from the perspective of a venture investor, this would absolutely be the case.

In 2015, Cybersecurity startups saw 332 funding deals with investments hitting the highest ever at $3.8 billion (235 percent growth over 5 years). New funds have been raised dedicated to this segment. What we’ve also seen is the increase in M&A. For 2015, there were 133 information security M&A deals, according to 451 Research’s Tech M&A Outlook 2016. In general, M&A is a natural part of the IT security market. It’s why this market segment is so attractive to venture investors.

Why is this happening? The bigger public players – Cisco, Check Point, HP, IBM, Symantec, and others – need to continually add to their arsenal of security solutions as the threat landscape continues to evolve. As exploits become more sophisticated and frequent, the security products needed to better detect, defend, and remediate need to dramatically improve at an accelerated pace.

As is typically the case in any industry, but even more so in security, larger companies with established customers and products typically innovate more slowly than startups that are not encumbered by a legacy business. Thus, in the booming cybersecurity industry, valued at over $75 billion in 2015 by Gartner, these larger companies evolve their product lines via M&A. This has been evident with recent acquisitions beyond Symantec and Blue Coat – Avast and AVG, Cisco and CloudLock, IBM and Resilient Systems, and most recently Carbon Black and Confer.

Symantec Forces the Industry to Stay Competitive

Symantec adding the Blue Coat product arsenal to its legacy product line will hopefully fuel the growth engine for a company that has been somewhat stagnant. Other large industry players may see this as a threat, that one of their major competitors now offers a more complete set of solutions via a one-stop shop. But at the same time, these players may view the Blue Coat acquisition as a unique situation for Symantec, a company with a portfolio of lagging technology solutions with a need for new management talent.

No matter what the industry view on Symantec, the other larger established security vendors, to remain competitive and grow in the enterprise market, will absolutely need to acquire other startups to provide best-in-class products.

While it is not necessarily true that the other larger players will need to find their “Blue Coat,” each has its own product weaknesses that need to be addressed. Next-generation solutions in areas such as endpoint defense, analytics, or threat intelligence may be higher on the shopping list for the various acquirers. Some of these acquisitions may carry price tags into the billions of dollars, while the vast majority will be smaller deals that bring a best-of-breed point solution into the product catalog.

A Startup’s Opportunity to Thrive

Given the rapidly changing security landscape, there has never been a better time to be a security startup with a compelling solution, but like any other attractive market, there are more players than can ultimately survive. The private companies with the strongest product technology, most readily able to address the next generation of evolving threats, driven by solid sales and marketing execution, will ultimately be the winners. More than any other IT segment, compelling technology and defensible IP are a critical piece of any security solution. It is hard to provide the highest level of defensive protection without innovative technology.

Some of these companies with more complete product families will have the opportunity to go public, becoming the next Palo Alto Networks. Others with more focused solutions will be M&A targets, becoming the engine that drives the future success and growth for established players.

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Evoke Pharma’s Stock Sinks on Stomach Drug’s Phase 3 Failure

Mon, 07/18/2016 - 12:30

Evoke Pharma is taking a hit in the markets after announcing a Phase 3 trial on a gastroinetestinal drug for diabetes patients failed to meet its goals.

In early trading Monday, Evoke’s (NASDAQ: EVOK) stock price was down 72 percent to $3.02 per share as of 11:30 a.m. in New York. The company is developing a nasal formulation of metoclopramide, , an already-approved treatment for digestive pain and other symptoms related to the stomach being unable to empty its contents. Metoclopramide is currently available in oral and intravenous forms.

Evoke’s late-stage study failed to show a significant benefit to the drug, EVK-001, versus placebo at all 41 of the sites that tested it nationally. In about one-third of the sites (13 out of 41), patients in the trial who took placebo reported an improvement in symptomatic diabetic gastroparesis.

Patients who have the stomach condition, which is also called delayed gastric emptying, have trouble emptying food from the stomach into the small intestine, according to the National Institute of Diabetes and Digestive Kidney Diseases. The condition is also associated with abdominal pain and bloating, and lack of appetite and can be can be caused by diabetes, which damages the vagus nerve regulating digestive functions.

Solana Beach, CA-based Evoke plans to conduct further analysis of the study, which examined 205 patients nationally over four weeks, and used a survey methodology to derive a score on the frequency and severity of the signs and symptoms of the condition. Evoke didn’t reveal any further plans.

Others have had trouble developing a treatment for diabetic gastroparesis, too. In 2012, then-Research Triangle Park, NC-based Tranzyme Pharma, which was acquired by Ocera Therapeutics (NASDAQ: OCRX) in a reverse merger in 2013, stopped work on its experimental treatment for the condition after the company’s pill was outperformed by a placebo in a mid-stage clinical trial.

But the Evoke news could open the door to the owner of relamorelin (also called RM-131), another drug being developed for diabetic gastroparesis. Originally developed by Rhythm Pharmaceuticals, the drug aimed to cut patients’ gastric emptying time—how long it takes for the stomach to flush out food—and showed positive results during a Phase 2 trial in May 2014. Later that year, Rhythm sold the candidate to Actavis, the Irish drugmaker formerly known as Watson Pharmaceuticals, which started a Phase 2b trial last year. Actavis is now known as Allergan (NYSE: AGN), adopting the name following its acquisition of that company last year.

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The Pan-Cancer Screen: Still Early for Prime Time

Mon, 07/18/2016 - 10:19

Imagine you could go to your doctor once a year for a blood test that would detect nearly every common type of cancer at an early stage. If you had a positive result, some further testing could pinpoint the cancer so you could have it treated before it spread. I would be ecstatic to have a simple tool for my patients that could detect cancers like ovarian and pancreatic that currently have no effective screening approach.

No surprise, then, that a host of companies are working on molecular diagnostics to detect early-stage cancers or pre-cancers using non-invasive methods. The most popular approach is screening blood for circulating tumor DNA (ctDNA), which several companies claim to reliably detect at very low levels in the blood. Grail Bio, a spin-off of DNA sequencing company Illumina, is the largest player in the field. Grail is working to develop a “pan-cancer” screen that it hopes will be used in the general population, potentially for millions of patients worldwide.

Despite the excitement I feel about the potential of ctDNA cancer screening, I can’t help but feel skepticism also. If these tests are to be applied for routine screening in the general population, they can’t just be good—they have to be nearly perfect. When screening for a fairly uncommon condition like pancreatic or ovarian cancer, even a one or two percent false positive rate would mean that many times as many people with a positive test result would be falsely positive as truly positive. These false positive results would lead to additional testing (CT and MRI scans, biopsies, and possibly even unnecessary surgeries), not to mention unquantifiable and unnecessary anxiety. What’s more, these tests may detect early-stage cancers that pose no real threat to patients. Overdiagnosis is both costly to the system and harmful to patients.

The PSA test represents a cautionary tale for these companies. A blood-based marker for prostate cancer, the PSA is similar in concept to ctDNA-based screening, although it is less specific for cancer than ctDNA. For years, the PSA was considered a key part of any middle-aged man’s annual physical. Yet in 2009, data from a large trial demonstrated that men who were screened had the same or higher risk of death as men who were not screened. Based on these data, the United States Preventive Services Task Force (USPSTF) recommended against screening for prostate cancer. PSA testing rates plummeted. Medicare has even considered penalizing doctors who order screening PSAs.

Cologuard, a colon cancer screening tool developed by Exact Sciences, provides an alternate example. The test can detect abnormal DNA in stool samples, and when not present, allows a patient to avoid the discomfort and inconvenience of a colonoscopy. Despite winning FDA approval in August 2014, uptake of Cologuard has lagged behind its scientific promise. The USPSTF, possibly in light of past experience with tests like the PSA, initially only recommended the test as an alternative to colonoscopy in select circumstances. Exact Sciences’ share price fell from a peak above $30 to below $8 on the USPSTF announcement. In 2015, only 104,000 Cologuard tests were performed (compared with 14 million colonoscopies). It was only last month that the USPSTF revised its recommendations and put Cologuard on an equal footing with colonoscopy.

Yet I worry that, because Cologuard has a 13 percent false positive rate, it will lead to many follow-up colonoscopies and add to patients’ anxiety and uncertainty. Because the Cologuard must be done every three years instead of every ten for colonoscopy, it is possible that the Cologuard won’t be a substitute for colonoscopies, but instead an expensive supplement.

To mitigate the problem of false positives, the simplest approach is to target people with a higher risk of cancer. This may mean people with cancer in remission, those with a known mutation like BRCA, or people with a strong family history of cancer. Because these groups are more likely than the general population to have cancer, there will be fewer false positives for each true positive cancer detected.

Guardant, another ctDNA detection company, has embraced this approach, as Xconomy’s Alex Lash has written. Similarly, PapGene hopes to use Pap smear samples to test women with BRCA mutations for ovarian cancer.

While it is less ambitious than Grail’s approach, this targeted strategy offers companies a faster path to market and reduces the risk of overdiagnosis that comes with general population screening. Better to study the test in a high-risk population more likely to benefit before exposing the general population to a test with poorly understood performance.

Once the tests have demonstrated excellent performance in high-risk patients and have won USPSTF support, I will happily offer them to my own patients as an effective screening tool.

Alex Harding is a resident physician in the primary care track of Internal Medicine at Massachusetts General Hospital. He has no financial interests to disclose. Follow @alexharding7

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Q2 VC Funding Soars in San Diego (After Revisions), and Top 10 Deals

Mon, 07/18/2016 - 01:01

What a difference a megadeal (or two) can make.

After the national MoneyTree Report was released last week, PricewaterhouseCoopers partner Ryan Spencer said he spent time on a call with Thomson Reuters, which provides the raw data, trying to figure out a change in the numbers for venture capital activity in San Diego.

PricewaterhouseCoopers and the National Venture Capital Association use the Thomson Reuters data to prepare the MoneyTree Report on venture capital activity every quarter. But the San Diego data was off.

The problem wasn’t in the second-quarter data. For the three months that ended June 30, the regional data showed that venture capital firms had invested $350.5 million in 19 companies in San Diego. That was OK, Spencer said.

The problem was a big change in the preceding quarter, which (erroneously) showed $361.5 million invested in 23 San Diego companies. When the first-quarter MoneyTree Report came out in April, it showed that venture firms had invested only $253.2 million in 21 San Diego startups.

It’s not that unusual to see revisions in prior quarters as more deals get reported, Spencer said. Still, the addition of two deals had increased total funding in the first quarter data by $108 million—or more than 42 percent.

The answer: One of the two deals added since mid-April was a $100 million “megadeal” (i.e. $100 million or more in venture funding). It was Grail, the liquid biopsy startup founded in January with initial funding from Illumina, Arch Venture Partners, Bezos Expeditions, Bill Gates, and Sutter Hill Ventures.

Grail (aka Grail Bio) was spun out of San Diego-based Illumina (NASDAQ: ILMN), but Grail is based in Redwood City, CA. The $100 million “megadeal” was misreported, Spencer said. It should have been included in the MoneyTree data for Silicon Valley, and should be deleted from San Diego’s first-quarter data. “We’re going to have to restate the quarter,” he quipped, with an auditor’s twinge of regret in his voice.

The second deal involved Dauntless 1, a specialty drug developer founded under the auspices of San Diego’s Dauntless Pharmaceuticals. Dauntless 1 raised $8 million during the first quarter from an unnamed venture firm, which wasn’t officially reported until the second quarter, when the startup raised an additional $4 million, according to MoneyTree data. “It was an appropriate adjustment that was not previously reported” by the semi-stealthy company, Spencer said.

With both deals properly accounted for, first-quarter venture funding in San Diego totaled $261.5 million (in 22 companies). So the $350.5 million that VCs invested here during the second quarter represents a 34 percent increase over the prior quarter (instead of a 3 percent decline).

But here again, the picture is distorted by another megadeal.

Of the $350.5 million that VCs invested in San Diego during the second quarter, most of it came from a $220 million megadeal for Human Longevity, the precision medicine startup founded by human genome pioneer J. Craig Venter. In fact, the Human Longevity megadeal represents the single biggest VC deal ever in San Diego, according to MoneyTree data that dates to 1995. The investors included Illumina, Celgene, and GE Ventures.

(A better comparison for the recent quarter might be the second-quarter of 2015, when VCs invested almost $134 million in 23 San Diego deals, according to the latest MoneyTree data. By this measure, total venture funding jumped by more than 161 percent.)

“Overall, it was a pretty good quarter,” Spencer said.

Dow Jones VentureSource, which also tracks quarterly venture capital activity, had lower second-quarter numbers for San Diego—with 20 companies raising a total of almost $104.2 million. The Human Longevity megadeal, however, was not included in the Dow Jones VentureSource data. VentureSource had already pulled Human Longevity’s funding into its total for San Diego’s first-quarter data.

The top 10 San Diego deals, based on MoneyTree data, are:

Human Longevity San Diego Biotech $220 million Seismic Solana Beach Software $40 million Suneva Medical San Diego Consumer $25 million Obalon Therapeutics Carlsbad Medical Device $15.8 million Ostendo Technologies Carlsbad Media $9.9 million Omniome San Diego Medical Device $8.4 million AnaBios San Diego Biotech $5.1 million AristaMD San Diego Software $5 million SlantRange San Diego Software $5 million Dauntless 1 San Diego Biotech $4 million

 

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Biotech Roundup: Hellos, Goodbyes, “Cures” Delays And Trial News

Fri, 07/15/2016 - 08:00

The week started on a reflective note. Our San Diego editor Bruce Bigelow penned a personal goodbye to entrepreneur Larry Bock, who died last week of pancreatic cancer at the age of 56.

And then the news flowed, from a fast reprieve for Juno Therapeutics to no mercy for Elizabeth Holmes. There were other goodbyes: Peter DiLaura said so long to Second Genome, the microbiome company he led for six years. And hellos: Third Rock Ventures brought in a well-traveled biotech veteran, Steven Holtzman, to run its hearing-loss startup Decibel Therapeutics.

And perhaps most important, there was the U.S. Senate’s kiss-off of the “Cures” vote—the package of bills that was approved in the House of Representatives last year. The Senate might come back to it after summer break. Or not. The package includes money for the fight against the Zika virus, the precision medicine initiative, Joe Biden’s cancer moonshot program, and a lot of other stuff. So, yeah—worth watching.

The only biomedical bill the Senate passed was to fight opioid abuse; the White House wasn’t thrilled but said the president would sign it because “some action is better than none.” That’s the very definition of a backhanded compliment, or, as Phil Collins once said, “hello, I must be going.”

Shalom, aloha, ahoj, and ciao, baby. Let’s get to the roundup.

—Juno Therapeutics (NASDAQ: JUNO) was on hold…and then it wasn’t. After last week’s revelation of three patient deaths in its leading cancer immunotherapy trial, the FDA suspended the study. But five days later, the green light came back on. Then Juno paid $10 million to buy Boston startup RedoxTherapies, getting rights to an experimental immuno-oncology drug it may use in tandem with its own treatments.

—The federal group that runs Medicare and Medicaid banned Theranos CEO Elizabeth Holmes from running a lab for two years, throwing into question the viability of the company. All eyes are on Holmes, who is scheduled to present data from the company’s technology at a medical conference on August 1. It would be the first time Theranos has shared data with the world.

—Cambridge, MA-based Sage Therapeutics (NASDAQ: SAGE) unveiled positive Phase 2 data for postpartum depression from a 21-woman trial. While small, the trial could have an impact not only on women who suffer from the condition but also on the direction of Sage itself. CEO Jeff Jonas told Xconomy previously that positive results could encourage Sage to dive deeper into studying mood disorders—from panic attacks to post-traumatic stress disorder.

—Enough good trial news. Time for the bear report: Los Angeles-based CytRx (NASDAQ: CYTR) reported negative data in a Phase 3 trial for its cancer treatment aldoxorubicin…and Xconomy’s David Holley got an interview with XBiotech (NASDAQ: XBIT) CEO John Simard, who aggressively defended the much-criticized Phase 3 colorectal cancer data the firm released July 2 at the European Society of Medical Oncology. A UCSF cancer expert called XBiotech’s data release “bogus.”

—Company funding news: Tesaro (NASDAQ: TSRO) of Waltham, MA, said it took advantage of positive Phase 3 data to raise $409 million in a secondary stock sale…Protagonist Therapeutics, based in Milpitas, CA, has filed for a $75 million initial public offering. The company began a Phase 1 trial last year for an irritable bowel disease treatment…Gene therapy developer Audentes Therapeutics said it would try for a $75 million IPO…Scarsdale, NY-based Sapience Therapeutics raised a $22.5 million Series A to develop a drug, licensed from Columbia University, for the brain cancer glioblastoma…Lyndra, a Cambridge startup working on oral drug delivery technology, has received $5.4 million in funding, according to a regulatory filing. Polaris Partners venture partner Amy Schulman is Lyndra’s CEO…San Francisco-based tissue analyzer 3Scan raised a $14 million Series B round from Lux Capital and Data Collective…and Magnolia Medical Technologies of Seattle, maker of a diagnostic tool for sepsis, rounded up nearly $14 million.

—Big Merck shuffle: The drug giant will open new labs later this year in Cambridge focused on microbiome research, and another site in South San Francisco focused on cardiometabolic disease and oncology discovery. Layoffs will hit two New Jersey sites and one in Pennsylvania, resulting in a loss of less than 10 percent of its “discovery, preclinical and early development” staff, a spokeswoman said via e-mail.

—In other Merck news, U.K.-based MRC Technology sold a portion of its royalty stake in Merck’s cancer immunotherapy drug pembrolizumab (Keytruda) to DRI Capital for $150 million.

—With $1.25 million in funding from five drug companies, the Massachusetts Life Sciences Center and Massachusetts General Hospital are launching an Alzheimer’s drug R&D center in Boston. Called the Massachusetts Center for Alzheimer Therapeutics Science (MassCATS)—not to be confused with this group—AbbVie, Biogen, Janssen Pharmaceuticals, Merck, and Sunovion Pharmaceuticals are the backers. Bradley Hyman, a professor of neurology at Harvard Medical School, will be the director.

—The FDA told Switzerland’s Santhera Pharmaceuticals to run a second Phase 3 trial for its experimental Duchenne muscular dystrophy drug before filing for approval. Shares of Sarepta Therapeutics (NASDAQ: SRPT) slid on the news, which analysts speculated dimmed the approval chances of Sarepta’s Duchenne drug eteplirsen. Sarepta’s drug is currently under an FDA review.

—South San Francisco-based Second Genome hired a new CEO and president. Glenn Nedwin is the former CEO of Taxon Biosciences, a microbiome company that was acquired by Dupont last year. He is replacing Peter DiLaura, the company’s CEO since 2010. Second Genome also said it has added $8 million more to its Series B round.

—San Antonio, TX-based StemBioSys inked its second distribution deal in as many months, announcing plans to bring its stem cell production products to South Korea. Korean life science equipment distributor SeouLin Bioscience Co. will begin selling StemBioSys products in the country, with products going on the market in the next few weeks, says CEO Bob Hutchins.

—Eleven Biotherapeutics (NASDAQ: EBIO), based in Cambridge, could be in line for $22.5 million from partner Roche after an experimental eye treatment hit an early milestone on the path toward clinical trials.

—Evelo Biosciences, also of Cambridge, absorbed its sister company Epiva Therapeutics and will pursue bacteria-based treatments of both cancer and immune-related disease. Trials in each field should begin next year, Evelo CEO Simba Gill told Xconomy.

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‘Megadeals’ Dominate Q2 as VCs Invest $15.3B, and Top 10 Deals

Fri, 07/15/2016 - 01:01

Showing little concern for stock-market volatility or worries over the Brexit, venture capital firms pumped $15.3 billion into 961 deals across the United States during the three months that ended June 30, according to the MoneyTree Report on venture capital activity.

It was the 10th consecutive quarter that venture firms put at least $10 billion into startups and other high-tech companies, including a $3.5 billion deal for Uber that represents the biggest venture capital deal of all time.

Still, the amount invested marked a 12 percent drop from the $17.4 billion that venture firms invested during the same quarter last year, and there was a 22 percent decline in deals, according to MoneyTree data released today.

Last year was the anomaly, according to Tom Ciccolella, U.S. venture capital market leader at PricewaterhouseCoopers. He said MoneyTree data shows the second quarter of 2015 as one of the biggest ever in terms of venture dollars invested. The MoneyTree Report is prepared by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters.

“The ecosystem is pretty healthy still, with almost 1,000 deals in the quarter and over $10 billion invested” during the most-recent quarter, Ciccolella said Thursday. “A lot of money went into software, mostly because of some big, expansion-stage deals.”

Ciccolella described the venture industry as “both resilient and nimble.”

There were 11 “megadeals” during the quarter, in which companies raised at least $100 million from investors, including four late-stage “expansion” deals. Altogether, the 11 deals accounted for an unprecedented 39 percent of deal value in the quarter. Included is the $3.5 billion that a non-traditional investor (the Saudi Arabia Public Investment Fund) invested in San Francisco-based Uber, and the nearly $1.3 billion invested in Venice, CA-based Snapchat. (The MoneyTree top 10 deals list is below.)

A rival survey released Thursday by Dow Jones VentureSource shows that U.S.-based companies raised almost $15.8 billion in 845 venture deals during the second quarter—a nearly 20 percent increase over the $13.1 billion raised in the previous quarter. The number of deals was about 8 percent lower than the 922 deals VentureSource counted in the first quarter of this year.

However, the first half of 2016 has been substantially lower, with a six-month total of just over $28.9 billion, than the same period last year, when venture firms invested over $36.7 billion, according to VentureSource data.

“Over the last few quarters, we’ve definitely seen the funding levels come down” from 2015, said Tim Holl, an EY audit partner in San Diego who heads the firm’s technology practice. “We’ve seen a pullback, certainly, both nationally and locally. Going forward, though, there is still a lot of capital out there.”

The industry surveys use different methodologies for collecting and sorting their data.

Still, the MoneyTree Report showed a similar change between consecutive quarters this year, with second-quarter funding of $15.3 billion marking a 20 percent increase over the first quarter, when MoneyTree data show that VCs invested $12.7 billion. The second-quarter deal count of 961 was down about 5 percent from the 1,011 deals of the first quarter.

Some other highlights pulled from the second-quarter MoneyTree Report:

—As usual, the software sector raised the most venture capital of any industry during the quarter, getting $8.7 billion in 379 deals. It is the 27th straight quarter in which software raked in the most funding. Internet-specific deals accounted for almost $2.6 billion investments in 251 companies.

—The life sciences sector (which includes biotechnology and medical devices) accounted for 15 percent of all venture capital dollars during the quarter, raising $2.2 billion in 161 deals. Compared with the previous quarter, that was a 10 percent decline in dollars and a 12 percent decrease in deals.

—IT services accounted for $946 million in 80 deals.

—Dollars invested in seed and early stage deals accounted for 51 percent of the 961 deals counted in the second quarter, which is up slightly from 49 percent of the 1,011 deals in the prior quarter.

—Venture firms invested $8.5 billion in 292 expansion-stage deals. That accounted for 56 percent of all venture dollars in the second quarter and 30 percent of the deals.

Here are the top 10 U.S. deals in the second quarter, based on the MoneyTree Report:

Uber Technologies San Francisco Software Expansion/13  $3.5 billion Snapchat Venice, CA Software Expansion/8 $1.27 billion Human Longevity San Diego Biotech Early Stage/2 $220 million Slack Technologies San Francisco Software Expansion/6 $199.9 million Clover Health Jersey City, NJ Financial Services Early Stage/3 $159.9 million SMS Assist Chicago Software Later Stage/4 $150 million Thrive Market Marina del Rey, CA Consumer Early Stage/3 $111 million Zoox Menlo Park, CA Industrial Energy Seed/2 $103 million Cylance Irvine, CA Software Expansion/4 $100 million Gingko BioWorks Boston Biotech Later Stage/3 $100 million Musical.ly Palo Alto, CA Software Early Stage/2 $100 million Reprints | Share:          

Why Entrepreneurs Should Care About Inequality and Divisiveness

Thu, 07/14/2016 - 09:00

The horrific news of recent weeks has amplified America’s long-simmering tensions and many divisions, and cast a new and disturbing light on the nature of social and economic inequality in this economy. The shootings that targeted police officers at a peaceful protest in Dallas, which followed the officer-involved shooting deaths of Philando Castile near Minneapolis and Alton Sterling in Baton Rouge, LA, also have raised distressing questions about racism in America and our criminal-justice system.

It might seem like such events have little to do with entrepreneurs and our innovation economy, but a thriving and inclusive innovation economy is a critical component to bridging the social and economic disparity that is driving our nation apart.

Investing in affordable education and training at all levels of society would prepare people for meaningful work, and provide compensation that could help reduce social inequities and divisiveness. In Sweden, citizens and entrepreneurs gladly pay taxes because of all the personal and social benefits those taxes produce. We are not Sweden—nor do we need to be—but we do need to invest in closing the income gap through education and training that produces new customers and workers for entrepreneurs and the array of services and amenities a middle-class lifestyle affords.

Need more convincing? Here some obvious, and not-so-obvious, reasons why entrepreneurs should care about inequality and divisiveness:

The obvious reasons:

1. Talented people and good companies can choose where they want to be physically located in a knowledge economy. They want to reside in good and safe places, so if your tech hub or city is fraught with social strife and rancor, it is unlikely to attract the talent and investors you need.

2. Demographics suggest that the customers of the future—whether they are interested in iPhone apps, Airbnb, retail, healthcare, or electronics—will come from a diversifying America and developing world economies on the rise. Social inequities constrain purchasing power. Quite simply, too many poor people are not good for business.

3. Your future workforce needs depend increasingly on people who may not be “work ready” because of our current level of social inequality. The shortfall in educational opportunities, especially in the sciences, technology, engineering, and math, is limiting the pool of workers in many underserved communities that socially and organizationally savvy companies know they need to grow and thrive.

The not-so-obvious reasons:

1. The infrastructure supporting your company, neighborhoods, and homes still depend on construction workers, pipe fitters and plumbers, utility workers, and an amazing array of skilled workers. If education and training programs in such trades were available—and affordable—it would represent the first step out of poverty, and provide sufficient family resources to educate the next generation of college grads.

2. The safety and security issues facing your startup, company, neighborhood, schools, and public gathering places would be better served by expanded investments in delivering needed education, training, and compensation for police, firefighters, nurses, and child and elder-care workers than by abiding social inequities.

3. Your personal lifestyle would be enriched by education and training that would assure more and better chefs, fitness instructors, landscapers, animal-care workers, and beauty services provided at a livable wage than by abiding social inequities.

The bottom line is that we must invest in education and training for a much broader range of skills and competencies in order to have the quality of life and supportive environments essential to entrepreneurial success. Engineers and MBAs cannot do it alone. We need to value and invest in multiple paths to opportunity and employment.

Technology will not solve all of our society’s ills, but I believe civic-minded tech entrepreneurs are a critical component to a brighter and more inclusive future.

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How Cyber Visibility Protects Against the Abnormal & the Immoral

Wed, 07/13/2016 - 06:00

Another day, another breach. For many Bostonians, the “privacy incident” recently disclosed by Massachusetts General Hospital (MGH)—which reportedly involved the personal information of 4,300 dental patients stored by a software vendor—hit close to home in many ways, as most of us have at one time or another been to MGH for ourselves or a loved one. It’s an institution in these parts. That’s why the thought of a data breach is troubling indeed.

For those of us who are focused on stopping these types of incidents, it’s even more troubling, as we are seeing them more often. So far in 2016 there have been over 500 breaches, resulting in the exposure of more than 12.8 million records, according to the Identity Theft Resource Center. The increase in the number of breaches has hit an alarming rate, which, if it continues, could lead to all medical records being compromised in just a few years’ time.

The problem comes down to a widening gap between the capabilities of existing cybersecurity solutions and the advanced threats they are expected to stop. In many cases, companies are not aware that a breach even occurred until they are notified by law enforcement. Industry data suggest that it takes 200 days for most breaches to be discovered, giving the bad guys plenty of time to do damage.

The oft-exploited characteristic of existing cyber solutions is that they follow a set of rules based on the types of attacks that have occurred previously. The attackers know this, and adapt their approaches to defeat these rigid rule sets. This forces the organization to chase the attacks with new rules—which are put in place after the fact and may just be “too little, too late.” Simply put, the threats are continually evolving, and the solutions are not keeping up.

Clearly, a new approach is needed.

We believe that the next generation of solutions that can adapt and discern new threat behaviors are far better suited to identify and stop these threats based on their ability to “learn” what normal behavior looks like for an organization’s users, applications, and devices on the network. By understanding what normal looks like, identifying the abnormal behaviors becomes much more straightforward.

Understanding Risk

While no single solution represents the Holy Grail of network security, there are a number of things that organizations can do proactively to bolster their defenses. The single most important thing an organization can do is to get a sense of its own specific areas of risk so that it can better understand where the chinks in the armor might be. Security solutions that also provide a measure of an organization’s cyber risk profile are long overdue. This involves gaining true visibility into how users, applications, and devices are interacting and what behaviors are risky in terms of cybersecurity or policy violations. Fortunately, such solutions are now available, allowing an organization to compare its own profile against pre-determined “risk indexes” based on industry benchmarks. This finally provides the answer to the question: How safe are we?

In order to protect the organization from losing the data—and trust—as a result of a breach like the one involving MGH, business leaders and security professionals need cybersecurity solutions that keep pace with the advanced threats they will continue to face and protect themselves at an acceptable level of risk against both the abnormal and the immoral.

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Can Innovation Save Us?

Wed, 07/13/2016 - 04:00

During a summer that’s been marred by political upheaval and horrific violence inside and outside the U.S., it’s natural for startup entrepreneurs and others immersed in the technology world—including us journalists—to wonder about the role of innovation in solving social problems.

In the wake of the murder of five police officers in Dallas, which followed so closely on the heels of the videotaped police shootings in Minnesota and Louisiana, which themselves followed so closely on the heels of the nightclub massacre in Orlando, there’s a sense that social tensions in the United States have reached a peak not seen since the late 1960s. The violence, and nonstop Internet media coverage, is ripping away whatever bandages still covered the wounds from centuries of racism and other isms.

Politicians can’t seem to quell the discontent. In fact, some of them are deliberately inflaming it. The middle ground, if there is any in U.S. politics, has long since been scorched. We all seem to live at the extremes of a polarized society.

Abroad, there’s only more chaos. Simmering resentment toward authority, elitism, and institutions has boiled over in Great Britain and threatens to destabilize the entire European Union. The terrorist attacks in Paris, Brussels, Istanbul, Dhaka, and so many other places testify to the unchecked, virus-like spread of ISIS-inspired jihadism, which is itself a product of social breakdown in the Middle East.

If your own livelihood depends in some way on entrepreneurship or innovation, chances are that you’re an optimist, at least about the big picture. You can’t help thinking that there must be some set of technologies, or some method of thinking, that could be adapted from the fecund world of technology and startups to heal and support societies as they find a way back to a semblance of peace and (hopefully more equitable) prosperity.

Is it really true?

In the short term, no.

In the long term, yes.

More body cameras might deter police when they’re tempted to use excessive force—or support an officer’s side of the story—but they won’t cure systemic racism, in which law enforcement organizations are merely a participant, not a first cause.

More smartphones, more social media, and more viral video will help to expose police brutality when it happens. This might stoke enough outrage to prompt real change in the way cities and states monitor law enforcement and begin to reverse the conditions that lead urban citizens, especially African-Americans, to fear and revile their own police forces. But in the short term, videos and social media can also foment even more violence, as we saw in Dallas.

Better edtech, perhaps in the form of next-generation MOOCs and other online training, might help people beset by the skills gap enter the high-tech workforce, which might help to slow rising inequality. But building effective courseware and delivering it to the right people will take time.

The same goes for better, more accessible healthcare. This is another important antidote to inequality for populations beset by disability, mental illness, or addiction. But even the modest gains in access achieved under the Obama administration will be under threat if Republicans get a chance to roll back healthcare reform.

The Internet, in all its permutations and with all its new modes of delivery on phones and wrists and televisions, will likely come to be seen as the single biggest step our species has taken toward current-events literacy and participatory democracy. But in the short term, it gives everyone access to their own set of facts, and supplies filters that allow us to retreat into exclusive virtual communities of like-minded people, stoking a sense of “us versus them.”

In short, technology can’t cure racism. It can’t bring out comity and understanding. It can help grow the economic pie, but it can’t, by itself, slice up the pie more equitably. For all of those things, we’ll need to find new leaders, ask them (and ourselves) tough questions, and locate new inner supplies of trust and honesty—along with the patience and civility to listen to one another. (Hint: more face to face, less screen time.)

All that said, there are plenty of tech companies and entrepreneurs out there who are working in small, gradual ways to nudge marketplaces, and the people in them, in socially responsible directions. The work these organizations are doing … Next Page »

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From Drones to Sharing Economy, Don’t Disrupt the Disruptors

Tue, 07/12/2016 - 15:04

Napa Valley met the Silicon Valley at the recent Xconomy Retreat on Technology, Jobs, and Growth (aka the Napa Summit). Experts in cutting-edge technology huddled with business leaders and investors in the California wine country to explore what’s on, and just over, the technological horizon.

Over the course of the two-day event, drones and the sharing economy came up again and again as game-changing technologies with the power to improve our lives. At the forefront of “disruptive innovation,” drones offer the potential for speedy and efficient delivery of supplies and medicine to far-flung areas, better and more effective crop production, and safer infrastructure monitoring and maintenance, among many other advances.

The emerging global market for business services using drones is estimated at more than $127 billion, according to a study by PricewaterhouseCoopers. Here in the U.S., we deliver six billion packages weighing less than three pounds every year. These deliveries—whether they’re replacement parts for your car engine from eBay or a new pair of shoes via Amazon—are the perfect candidates for drone delivery.

Drone delivery will take noisy trucks off our city streets, in the process reducing urban traffic, cutting fuel consumption, reducing carbon emissions, and speeding up delivery times. A huge win, but only if we create the right policy environment for this technology to thrive.

Despite this economic potential, we are concerned that a patchwork of conflicting and confusing state and local regulations could hinder growth and investment in drones and related services. For U.S. competitiveness and leadership, as well as safety of the national airspace system, it’s crucial that states and localities recognize and defer to the Federal Aviation Administration’s jurisdiction, its recently released nationwide rules, and other subsequent policies that balance safety and innovation.

The sharing economy is similarly creating new job opportunities, while bringing critical services to underserved areas.

Airbnb has given more than 350,000 people a platform to become entrepreneurs—and at the same time, provides accommodations in areas where traditional commercial lodging is either unavailable or beyond some people’s budgets. For example, when Pope Francis visited Philadelphia last year and all the hotels and motels were booked, homeowners stepped up—via HomeAway and VRBO, as well as Airbnb—to accommodate the overflow of visitors who came to town to see him.

During that time, Uber and Lyft augmented Philadelphia’s taxicab fleet to help people navigate through the hundreds of thousands of visitors the papal visit drew. At the same time, those ridesharing services put extra money in the pockets of drivers and used vehicles that otherwise might sit idle for 95 percent of the day.

Uber adds an estimated 50,000 new drivers every month, and 54 percent of Lyft customers say the ridesharing service enables them to get to destinations that would otherwise be inaccessible. In both cases, these successes come despite the numerous regulatory hurdles and other roadblocks regularly thrown in their path by the legacy taxicab industry and its political allies.

In that sense, Uber and Lyft are textbook examples of “disruptive innovation,” and they should be welcomed by cities, rather than resisted, as was the case in Austin, Texas.

In May, Austin voters upheld a city statute requiring fingerprinting of drivers, a measure that won’t significantly strengthen public safety beyond both companies’ own strong background checks. As a result, Lyft and Uber pulled out of the city, rather than comply with the burdensome requirement. It was a lose-lose situation for a rapidly expanding city that’s also a booming tech hub.

And what happened when the biggest ridesharing companies pulled out of Austin? A host of smaller startups swooped in to fill the void—confirming that residents are eager for innovative transportation solutions.

Cities such as Philadelphia and Austin also should embrace Uber and Lyft for the ancillary benefits they provide; namely, relieving traffic congestion by expanding public transit options.

In some markets, thanks to the connectivity provided by the Internet of Things, ridesharing services are collecting and sharing road and traffic conditions in real time—and in some cases, sharing data with governments that enables smarter management of urban growth.

Innovative business models such as drones and ridesharing have always disrupted the status quo, and that makes some uncomfortable, particularly those who benefit from maintaining the status quo. But we should never let the status quo—however entrenched, however politically powerful, however comfortable—stand in the way of the next great technological leap forward. We must always keep our eyes trained firmly on the horizon.

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